Traditionally, value has been defined as the sum of quality and experience divided by cost (value = quality + experience / cost). In this equation, as quality and experience increase, value increases. While this standard equation for calculating value includes key variables, hospitals should consider who they are defining value for: patients and families, the organization, payers or the community. The distinction is important—it drives the type of data needed, defines the teams that need to be engaged, and helps determine what value or improvement organizations are striving for.
While cost containment is essential, mission-driven work occurs within the numerator of the value equation. Framing value in this way helps focus everyone's efforts at Children's Hospital of Richmond at VCU in Virginia.
- For senior leadership, it has led down the road of lean transformation.
- For providers, it means putting the patient at the center of every decision, big or small.
- For donors, it means having a clear understanding of the value of a dedicated quality improvement team for the children's hospital.
Making the case for value
At Children's Hospital of Richmond, there are many examples of work that align with the organization's pediatric priorities, including timely and effective asthma care, improved cystic fibrosis outcomes, faster time to antibiotics for children at high risk of sepsis, safe care of central venous catheters, and more. Here are two examples to demonstrate how to make the case for value to leaders by aligning with their priorities, as well as showing the cost savings of improvement work.
Sickle cell disease (SCD)
More than half of the time children with SCD come to the emergency department with pain, they are admitted to the hospital for more IV medication to treat their continued pain. Children's Hospital of Richmond created individualized pain plans that focus on rapid dosing of pain medication customized to the needs of each child.
Less than a year into the initiative, the hospital decreased the proportion of children with SCD in pain who are admitted to the hospital by 27% and shortened length of stay for admitted children. The initiative:
- Improved safety through standardization and reduction of total opiate exposure.
- Decreased the time until patients receive pain medication.
- Decreased pain scores and reduced hospital admissions.
- Improved care for an underserved population.
- Allowed more children to be home and miss fewer days of school.
To make a case for value, the team focused on several metrics tied to hospital costs and patient charges. By decreasing the admission rate, they reduced average cost per episode of care, which is important with value-based reimbursement agreements as the hospital moves away from a fee-for-service model.
By preventing admissions, the hospital created bed days for other patients, which on average led to increased reimbursement. Through individualized care for children who were admitted, the hospital decreased length of stay, opiate burden, and the total number of interventions needed for these children.
The hospital had a 14% decrease in costs and charges per hospitalization year over year. Through decreased admissions and length of stay alone, the hospital had a significant decrease in cost to patients, and that has compounded over time to save the hospital nearly half a million dollars.
Using shared practices from other institutions, evaluating current practices, improving processes, and creating urgency, the NICU and PICU reduced the rate of unplanned extubations (UE) by over 60%. While reducing harm from hospital-acquired conditions does not generate revenue, it does two important things.
The average cost of each UE in the NICU is $36,000 and adds on average 6.5 days to the length of stay. Harm leads to higher costs, and the math is simple. The hospital must provide the additional care required and cannot admit another patient for those five days.
Preventing 10 UEs creates an additional 65 bed days at an average reimbursement of $5,000 per day. Adding the cost savings from preventing these complications and the additional revenue from admitting additional patients yields about $685,000 in cost shift for those 10 cases in the NICU alone.
The time and effort required to generate and sustain improvement is considerable. These numbers give an organization the ability to justify freeing nurses' time for improvement work or the hiring of a coordinator to track hospital-acquired conditions.
The case for reinvestment
To show that similar improvement work adds value to the organization, staff, payers, the community, and most importantly, patients and families, count the cost savings and revenue potential of each improvement activity. Then demonstrate the effects of quality improvement work by creating a value dashboard.
An example from Children's Hospital of Richmond's hematology/oncology team shows the cumulative effect of multiple small projects on the bottom line. In addition to tracking team members, aim statements and PDSA cycles, the team intermittently calculates the financial effect of each project.
Each project had a modest effect on patient care and dollars spent, however, the cumulative result of quality improvement within the division is significant. Remember, the savings from quality improvement efforts do not end after a year. If improvement is sustained, the cost savings continues and should be counted.
It only requires a small piece of the savings to fund a quality improvement team. Given that the two projects described above avoided more than $925,000 in costs, the hospital will be able to keep most of the savings from improvement efforts and continually make a case for a portion to fund and grow a quality improvement team.
Find a focus and frame it
Payers are actively evaluating patient outcomes against standard quality outcomes and adjusting payments up or down, based on those outcomes. Proactively focusing and framing your team's quality improvement efforts based on the value equation, reducing variability in clinical practice, and articulating the reductions in costs to provide care improves the ability to create and sustain growth.